Second pact signed by Hearst, Times kept private

In addition to a revised joint-operating agreement (JOA), The Seattle Times Co. and The Hearst Corp. signed a second document — which has not been made public — when they settled their four-year-old legal dispute, The Times disclosed Thursday.

Times spokeswoman Jill Mackie said the document is a settlement agreement that deals mostly with how the two companies will go about dismissing their legal claims against each other.

It's also the document, she said, in which The Times agrees to pay Hearst, publisher of the Seattle Post-Intelligencer, $49 million to give up its right to 32 percent of The Times' profits until 2083, should the P-I close and The Times become Seattle's only daily.

A Hearst spokesman did not respond to an e-mail seeking confirmation and comment.

Mackie said the second agreement doesn't deal with the future of the JOA that binds the companies and, therefore, does not need to be made available to others. "It's a settlement of a contract dispute between two parties," she said.

But an intervenor in the Times-Hearst lawsuit said it wants to review the document.

"Is it something we want to see? Absolutely," said Seattle lawyer Anne Bremner, co-chair of the Committee for a Two-Newspaper Town.

The group is weighing whether to drop its claims against Hearst and The Times in light of the settlement announced Monday. It expects to say something about the matter next week.

Bremner would not say whether the committee would go to court to get the second document if the companies refuse to provide it.

The first document — the revised JOA, filed with the U.S. Justice Department and made public Tuesday — calls for Hearst to pay The Times $25 million in return for The Times foregoing until 2016 its right to move to end the business relationship between the papers.

But it makes no mention of the $49 million payment from The Times to Hearst, something both companies had said was part of the deal.

Newspaper JOAs are partial exemptions from antitrust law that the Justice Department must approve. They allow two papers to maintain separate news operations but merge printing, circulation, advertising and other business functions, if one paper is failing.

In Seattle, where a JOA has been in effect since 1983, the smaller P-I is considered the failing newspaper. The Times owns the presses, warehouses and trucks and employs the carriers that deliver both papers.

The Times moved to trigger an escape clause in the JOA in 2003, claiming the arrangement no longer was economically viable.

Under the contract, Hearst had a choice: Let the contract terminate and cut off the relationship with The Times, or close the P-I and collect 32 percent of The Times' profits.

Hearst sued, arguing that either option was a P-I death sentence. The settlement announced Monday just before the start of a climactic binding-arbitration hearing apparently brought the dispute to a close.

The Committee for a Two-Newspaper Town has challenged the constitutionality of the provision that would have given Hearst 32 percent of The Times' profits — a provision that isn't part of the revised JOA.

The new JOA is to take effect when The Times pays Hearst, which is expected within a few months, Mackie said.

Meanwhile, Times Publisher Frank Blethen said in a brief interview Thursday that the growing economic problems of newspapers in Seattle and across the nation over the past two years played a significant role in The Times' decision to settle.

He pointed to recent evidence of the industry's deepening problems, including:

• The sale and breakup last spring of Knight Ridder, once the nation's second-largest newspaper company.

• This month's sale of the Tribune Co., the current No. 2.

• The New York Times Co.'s move in January to write down the value of two New England papers it owns, including The Boston Globe, by $814 million.

• McClatchy's sale in December of The (Minneapolis) Star-Tribune for less than half what it paid for the paper in 1998.

In Seattle, Blethen said, the combined Times-P-I circulation, slipping all decade, declined more precipitously in 2005 and 2006. The papers were running on budgets that were unsustainable long term, he added.

"All that's really come to a head in the last 24 months," Blethen said.

While both sides had agreed not to appeal the ruling from the arbitration proceeding, it wasn't likely to end the legal fight, he said. The dispute was distracting attention and draining resources that should have been going toward solutions to the underlying problems, he added.

The settlement, and the opportunity it provided to re-establish a cooperative relationship with Hearst, was preferable to "the unpredictability that faced us with the litigation," Blethen said.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com